In his post last year on FP, Harvard professor Stephen M. Walt makes a compelling argument that Confucianism may be a better model for understanding state policy and decision making than traditional frameworks like realism or liberalism. Walt argues that the tenants of Confucianism allow us to assume that most states operate with a degree of incompetence – often making decisions without adequate information, experience, or understanding. Indeed, one need not look far to find plenty of examples of seemingly moronic decision-making by the powers that be. The Confucian model is not only a thought provoking lens for political science, but is also an interesting model for understanding organizations.

However, I would make one caveat: focusing too much on the individual seems somewhat flawed. In this interpretation of Confucianism, the assumption is that people are incompetent or at least prone to stupid decisions. To balance our latent stupidity, society must create rigid systems and controls to keep us in check. While it’s easy to point fingers at the people in power (perhaps for good reason), often it is the system itself that promotes such failures. Aside from the rare transformational figure, the individual has limited impact next to the collective machinery of a government or organization. This article in the New Yorker highlights how President Obama succumbed to the unbending culture of Washington, which again points to the pervasive nature of culture. When a country, company or group has a culture that allows for. or even promotes incompetence, then the problem becomes systemic. What makes this challenging is that these “incompetent cultures” often are built on success and achievements of the past.

Staying with political science for a moment, the politics in the United States illustrates how nations are plagued by cultural stagnation. Twenty-five years ago, the majority of world’s nations modeled at least components of their founding charters after the U.S. constitution. Today however, most young nations find a document created 230 years ago less relevant and are instead likely to reference the more dynamic Canadian constitution. Why? Because the U.S. constitution has been slow to evolve and insists on adhering to concepts written before there was indoor plumbing. Other nations have figured this out, but the U.S. is unable to evolve. It is no wonder Washington politics has become such a quagmire.

For our purposes, the examples Walt provides of common pitfalls governments fall into also capture many of the challenges a stagnant culture can create for organizations.

1. New circumstances. Walt points to the absurdities the nuclear age brought, namely how Russia and the U.S. squandered trillions building weapons that could obliterate the world many times over. When companies are faced with change, there is a tendency to use old strategies to tackle new problems. Look at Nokia’s struggles to adapt to the smartphone market or U.S. car companies (any easy target I know) and their issues to developing vehicles suited for a world with oil above $100/barrel.

2. Unfamiliar environments. Similar to the first point, when companies enter into new environments, they are often faced with markets, cultures, and rules that are far different than what they’re used to. The tale of China’s feverish growth is littered with cautionary stories of MNC’s failing to understand the environment they were entering. Best Buy, for instance, wrongly assumed their U.S. model of enormous box stores and sterling customer service would lure consumers away from lower-priced, local options. This was not the case. Most organizations quick to laud the importance of understanding their environment, but in practice this often means relying on intuition than actual data. It takes a conscious, systematic effort that imbeds environmental awareness into the culture of the organization.

3. Overflowing in-boxes. When faced with change – whether it be new circumstances, unfamiliar environments, whatever – the challenges and problems created by some shift often seem endless. For many companies, there is a tendency to tackle too much at once. However, when a company takes on more issues then they can handle, the process grinds to a halt or blows up spectacularly. This is because not enough time is spent fully understanding what a problem is and how best to solve it. Companies should leverage their strengths and focus only on issues that have both the greatest impact and the greatest room for improvement. (We often encourage teams to develop a set of simple rules to help focus their efforts on tasks and issues that have the greatest impact.)

4. Taboo topics. Just like nations, organizations that restrict open discourse will limit their ability to fully leverage their people resources. This leads to missed opportunities to innovate, catch issues before they become serious, or otherwise maintain a competitive advantage. In today’s business world, where emergence and collective input are essential, operating with antiqued notions of secrecy puts organizations in a precarious position that frequently leads to setbacks if not tremendous failure.

5. Ideological blinders. Walt warns us to be wary of “anyone offering up universal and unquestioned truths about politics or society” and the same can be said for organizations. While there may be less zealots in organizations than politics, there are plenty of examples of companies making blanket assumptions about the world around them and paying the price for it. Kodak, for instance, assumed Americans would never desert their brand for Fuji and that digital cameras weren’t a viable replacement for film.

6. Finally, Success. Edgar Schein explains culture as a set of assumptions built on a group’s shared successes (aka autopilot). As I said in earlier in this post -these assumptions can lead to a common trap for organizations that need to innovate or adapt. Companies become resistant to risk taking, instead adopting a status quo that assumes what worked in the past will work in the future – because SUVs were popular in the 90’s, they’d be popular in the 2000’s. Sustained success requires constant adaption and new learning.

For companies to thrive amid the ever-increasing scale, complexity, and volatility of the Chinese market, a new approach to leading and managing organizations is required. What worked in the past no longer guarantees success in China today. Companies are under enormous pressure to build new capabilities and expand their customer base while still maintaining growth and profitability. At the same time, both customers and employees are becoming more sophisticated and more demanding – and competition is fiercer than ever. In the face of such mounting challenges, organizations must begin to operate in a new way.

Based upon our latest research and that of others, the key to achieving sustained success in China is to focus not only on strategic execution, as many companies do, but also on building a strong and unique culture. Companies that are able to simultaneously address strategy and culture are far more likely to achieve their goals and go beyond short-term results to cultivate organizational capabilities that will help them thrive in the future. But this is easier said than done.

While most organizations are “pre-wired” for strategy formation and execution, managing company culture comes as uncharted territory to most business leaders. New models and mindsets are required to navigate the dual challenge of strategy and culture. Luckily, there are an increasing number of organizations in this market that have already begun this journey and are willing to share their experiences and learning about the impact that culture has on their business.

This study was commissioned for that very purpose: to collect and disseminate knowledge and practices related to company culture trends and improvement activities and to create a culture benchmark of high performing companies in China. From November through December of 2012, the Human Resource Excellence Center of China (HREC) and Reya Group conducted a survey of 321 organizations across more than 13 industries in China as well as in-depth interviews with HR Leaders. Nearly 60% of participating organizations were Foreign-invested Multinational Corporations(MNC), followed by Private- owned enterprise, Sino-foreign joint venture, and State- owned enterprise. Culture characterizations within this study are based upon Reya Group’s proprietary organizational diagnostic model and assessment.

Key findings include:

Companies in China have distinctive cultural characteristics.Organizations operating in China are highly focused on managing relationships, achieving results, and adapting to their changing environments.

There is a clear link between culture and performance.Comparatively, high performing organizations develop cultures that emphasize collaboration and innovation, whereas lower performing organizations are far more results- driven and risk-averse.

The culture preferences of employees mirror the high performing benchmark.Preferred culture ratings are closely aligned with the high performing culture benchmark, indicating employees appear to have a strong sense of what is required for success in their businesses.

The investment and quality of culture programs is linked to performance.High performing companies are distinguished from their peers by both investment in culture programs as well as the relevance of these programs.